August 6, 2024

New Zealand News

Falling Inflation Brings The House Down With It

The battle against inflation is being won. By the end of June, annualised inflation had come down to 3.3%, according to Stats NZ. That level is encouragingly close to the Reserve Bank of New Zealand´s target range of 1 – 3%. However, in a consequence which has an awful impact upon the steel industry, the RBNZ´s scorched earth policy of higher interest rates has killed off demand for new houses. According to figures released last week by Stats NZ, there were only 33,627 new homes consented in the year ended June 2024. That´s 24% less than for the year ended June 2023. Within the decline, the 14,916 stand-alone houses consented was a 19% drop on the 2023 figure. Meanwhile, the 18,711 multi-unit homes consented was 28% lower than in 2023. Multi-unit homes include townhouses, apartments, retirement village units, and flats. “The number of homes consented in the year ended June 2024 has fallen to levels last seen five years ago,” said Michael Heslop, the construction and property statistics

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manager at Stats NZ. The figures for the individual month of June are even more discouraging. There were 2,178 new homes consented, down 36% compared to June of 2023. “While all regions experienced a decrease in the number of homes consented, some of the territorial authorities within those regions had a larger decrease than others,” Heslop noted. Some of the declines in consents, compared to the year ended June 2023, were as follows: Christchurch city, down 12%; Hamilton city, down 29%; Tauranga city, down 36%; Dunedin city, down 9.4%; Wellington city, down 69%.

Of course, statistics only tell us what has already happened. For an insight into what is soon to occur, the most recent Procurement Update from Steel & Tube is a useful reference point. Its principal observation is that, even though the steel industry is showing signs of an improving outlook both domestically and globally, it is still encountering soft demand and rising costs amid ongoing economic pressures. As destabilising external factors, the Update pointed to the weak Chinese economy and the Israeli-Palestinian conflict. Specifically, Steel & Tube said: “Moving forward, steel mills will need to navigate these challenges strategically to maintain productivity and profitability in a fluctuating market, meaning our suppliers will likely pass through selective price increases in the latter part of the year. With the current Red Sea shipping crisis and the ensuing rapid escalation in shipping costs reminiscent of the pandemic, there are several cost pressures currently impacting landed product prices and compressing margins in a high local operating cost environment that is yet to abate. The ability to absorb the accumulation of these costs through the supply chain is becoming increasingly difficult, despite the market environment in which we compete, meaning market prices have probably “bottomed”. While prices will likely remain volatile for the remainder of 2024 as businesses rigorously compete for volume, market analysts are forecasting prices to trend up in 2025 as current margin profiles become unsustainable. The cost increases likely to be seen in supply chains in 2025 are expected to be smaller in magnitude than in more recent times; however, they are unlikely to be offset through any exchange rate appreciation, so could be noticeable in nature and likely passed on.”

The NZ Government´s decision in May to scrap the First Home Grant scheme drew criticism from some quarters. Subsequently, in a gesture of goodwill and with its promotional eye wide open, Fletcher Living announced it will offer first-home buyers a $10,000 grant towards their first home deposit when they purchase a Fletcher Living home in either Auckland or Canterbury.

Steve Evans, Chief Executive of Fletcher Building’s Residential and Development Division, said: “We knew many of our customers had counted on the First Home Grant for their deposit budgets. When we heard it was being removed and might delay their home purchases, we wanted to introduce our first-home buyer grant to support them.  Owning your first home is very much part of the Kiwi psyche. It’s an exciting journey but it’s not an easy one. Getting on the property ladder can be challenging, especially for first-home buyers who work tirelessly to save up for their initial deposit.” Corelogic’s Q1 First Home Buyers Report revealed that first-home buyers accounted for 26% of purchases in the first three months of 2024.

First-home buyers can access the grant by purchasing a Fletcher Living home within Auckland or Canterbury, meeting regional house price caps (under $875,000 in Auckland and under $775,000 in Canterbury, as set by the Government’s First Home Grant). Eligibility requirements include an individual income of less than $150,000 or a combined income of less than $225,000 over the past 12 months. At present, the grant is eligible for first-home buyers who have purchased a property after June 24, with a settlement date before November 1, 2024.

Finally, a reminder that Steel Construction New Zealand´s annual conference and awards dinner is scheduled for 7 – 8 November in Rotorua. The welcome drinks, Steel Structures seminar, and Steel Agenda conference will be held at the Novotel Rotorua Lakeside Hotel. The Gala Dinner will be held at the Energy Events Centre. The event is exclusive to members of SCNZ.

* This month´s New Zealand Steel News was authored in-house by Australian Steel News

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